Wisconsin Energy

Wisconsin Energy Corporation (NYSE: WEC) is a company based in Milwaukee, Wisconsin that provides electricity and natural gas throughout Wisconsin and the Upper Peninsula of Michigan. The company also has several non-regulated, non-utility branches.

The company is also referred to as We Energies, which is the trade-name of Wisconsin Electric Power Company (or WEPCO) and Wisconsin Gas Company, the primary utility subsidiaries of Wisconsin Energy Corporation.

CEO Compensation
In May 2007, Forbes listed CEO Gale Klappa as receiving $4.43 million in total compensation for the latest fiscal year, with a three-year total compensation of $10.65 million. He ranked 21st on the list of CEOs in the Utilities industry, and 312th among all CEOs in the United States.

Explosion at Oak Creek power plant
On February 4, 2009, six people were injured during an explosion and fire at the Oak Creek power plant owned by Wisconsin Energy. The explosion occurred at a plant silo used to collect dust after coal is dumped into the hopper. All of the people hurt were contractors working in the hopper at the time. The most severely burned patient suffered second- and third-degree burns on his hands, face and back.

The company is currently building two new units of 615 MW in at the plant, but said the area where the explosion occurred was not part of the new construction on the facility.

We Energies raising rates
On July 2, 2009, We Energies filed a rate increase request with the Michigan Public Service Commission (PSC) to offset some of the $2.3 billion construction costs for its new Oak Creek Units 1 & 2. If approved by the PSC, Michigan customers could see their energy bills increase up to 33 percent. The average total monthly increase would be about $37 per customer.

Michigan regulations require energy companies to wait until a new power plant is operating before raising rates. However, Wisconsin has already allowed WE to increase rates to offset construction costs. As a result, Wisconsin customers will not see the same dramatic increases once the plant is in service.

Oak Creek settlement uncertain
In November 2009, environmental groups refused to revise a deal to settle litigation over Oak Creek Units 1 & 2 to address concerns raised by state regulators. The proposed settlement would see the Sierra Club and Clean Wisconsin drop their challenge to environmental permits issued for the project, in exchange for a WE commitment to fund environmental projects in Lake Michigan and expand renewable energy projects in the state. Under the agreement, We Energies, Madison Gas & Electric Co., and WPPI Energy would spend $4 million per year for 25 years on projects to improve water quality in Lake Michigan. An additional $5 million would be allocated to create a nonprofit group focused on efforts to reduce global warming emissions. PSC regulators are hesitant to raise customer rates to fund the Lake Michigan projects, which could prompt the environmental groups to revive their lawsuits. If the groups win, the cost of litigation could add more than $1 billion to the cost of the power plant, as opposed to the $100 million cost of the settlement.

July 2010: Michigan U.P. customers to pay $23 million for Oak Creek coal plant
On July 1, 2010, regulators in Michigan rejected arguments by customers of We Energies that the utility's new coal-fired power plant in Oak Creek is not needed because Wisconsin and Michigan's Upper Peninsula have sufficient power. The Michigan Public Service Commission (PSC) rejected proposals by the Michigan attorney general, and gave We Energies permission to start collecting from Michigan customers for the new power plant.

The plant was proposed when Wisconsin was running short on power and experienced power supply problems in the late 1990s. But the recession caused a dramatic drop in electricity sales, and mine operator Cleveland Cliffs argued the power plants should not be billed to the company and 28,000 other Michigan customers of the utility. Regardless, in a ruling that will raise rates in Upper Michigan by $23 million, the Michigan PSC said, "It is improper to use hindsight to second guess (We Energies') decision in 2002 to add capacity to its generation system."

The coal-burning plant is opening in two phases, with the first unit opening early 2010 and the second unit projected to open in August or September 2010. Because the second unit has not opened, Michigan customers won't have to pay for that yet. The company had initially proposed to raise rates of Michigan customers by 33%, or $42 million, but because the second unit is not opened, the rate increase will be $23 million. The Michigan PSC allowed a portion of that rate increase - $12 million - to take effect in February 2010, at the time We Energies took over control of the first Oak Creek coal unit from its contractor, Bechtel Power Corp.

To address the fact that We Energies has more power than it needs, the Michigan PSC said it will investigate whether it still makes sense for the Milwaukee power company to be buying power from a Calpine Corp. natural gas-fired power plant in Zion, Illinois. That matter would be resolved in a future case. The Michigan commission also was asked to weigh in on whether We Energies should be allowed to receive a 12.7% return on its investment in the $2 billion coal-burning plant project. In Wisconsin, the rate of return for that investment was locked in for 30 years. Michigan's attorney general objected to that as excessive, but the Michigan PSC ruled those objections should have been raised in a separate case several years ago.

Increased customer rates and industry profits
In Feb. 2011, it was reported that investment in the Oak Creek power plant provided the lion's share of Wisconsin Energy's earnings boost in 2010, and the power plant will be the biggest reason profit will increase in 2011. The utility holding company announced record profit on Feb. 1, 2011, and reaffirmed its forecast for higher earnings in 2011 during a conference call with investment analysts. Profit from continuing operations increased 20% to $3.84 a share: "Roughly 80% of the increase in our earnings for 2010 was the result of the investment we've made in the first generating unit at Oak Creek," Wisconsin Energy Chairman and Chief Executive Officer Gale Klappa said. In 2011, with nearly a full year of profit from the second Oak Creek unit, operating earnings are projected to rise by 7% to 9%, to $4.10 to $4.20 a share.

The parent company We Energies raised prices for electricity customers in a series of rate increases while the power plants were under construction, including a big price hike in 2008 that was phased in over time. The 5% increase means the typical We Energies residential customer is now paying more than $104 a month for electricity. A typical bill was almost 40% higher last month than it was six years ago, the first year of construction of the power plant project. Customers could see another increase in the coming month or so, as the state Public Service Commission is expected to rule on a 1% hike linked to higher fuel costs for the utility's power plants.

Feb. 2011: Plant nine percent over budget
In a filing with securities regulators on Feb. 27, 2011, We Energies said customers may be on the hook for more money to pay for the Oak Creek power plant, based on latest estimates that indicate the project came in 8.7% over budget - adding $191 million to the price tag for the largest construction project in state history. The project initially was approved with a budget of $2.19 billion. Project delays blamed on litigation and permitting delays, as well as weather-related construction problems, have contributed to rising costs. The total price tag is now pegged at $2.38 billion.

A report by R.W. Beck & Co., a consultant hired by the state Public Service Commission (PSC) to review the progress of the construction, indicated that the cost for the second phase of the plant would come in about 9% over budget. The amount to be collected from We Energies customers is expected to be provided to the PSC in coming months as part of a proceeding to set rates in 2012 and 2013.

Settling permit case by funding voluntary regulation group
In July 2009 Governor Jim Doyle announced the formation of the Wisconsin Climate Change Action Initiative with an initial $5 million contributions from We Energies, Madison Gas & Electric and WPPI Energy. Doyle stated that the group would work "to increase voluntary conservation practices that will save money and have positive environmental impacts" and "will focus on providing education, practical advice and expertise to residents, communities and businesses." Doyle stated that initial funding would be "provided through a $5 million contribution from We Energies, Madison Gas & Electric and WPPI Energy under an agreement with Clean Wisconsin and Sierra Club to resolve outstanding permit issues" related to the Oak Creek Units 1 & 2.

American Coal Ash Association
Wisconsin Energy is a member of the American Coal Ash Association (ACAA), an umbrella lobbying group for all coal ash interests that includes major coal burners Duke Energy, Southern Company and American Electric Power as well as dozens of other companies. The group argues that the so-called "beneficial-use industry" would be eliminated if a "hazardous" designation was given for coal ash waste.

ACAA set up a front group called Citizens for Recycling First, which argues that using toxic coal ash as fill in other products is safe, despite evidence to the contrary.

NAACP Clearing the Air Road Tour
In April 2010, Jacqui Patterson of the NAACP Climate Justice interviewed community members in Milwaukee. Jacqui wrote the following account of the impacts of the Valley Power Plant:
 * The Valley Power Plant is located on the Menomonee River about a mile southwest of downtown Milwaukee. It is wedged between the predominantly African-American Avenues West neighborhood to the north, and the predominantly Latino neighborhood of Walker’s Point  to the south. Over 24,000 people live within a mile of the plant, and both the Aurora Sinai hospital and Marquette University campus are less than a mile away.


 * Mr. Thomas White, State Conference President for the NAACP spoke with me about the hazards of the plant to the surrounding communities, described the communities a bit, and then took me on a driving tour of the nearby areas.

Valley Power Plant to convert to natural gas
In early May 2011, We Energies announced that it planned to take the initial steps toward converting the Valley Power Plant to natural gas from coal. In March 2011, Clean Wisconsin and Sierra Club filed petitions with the Wisconsin Department of Natural Resources and the U.S. Environmental Protection Agency, contending that the Valley Power Plant's air permit, issued by the DNR, violates the Clean Air Act.

Contact Details
231 W. Michigan St. Milwaukee, WI 53203 414-221-2345

PO Box 1331 Milwaukee, WI 53201 Website: http://www.wisconsinenergy.com/

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